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‘Smart’ copycat mutual funds: on the performance of partial imitation strategies

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  • Roberto Stein

    (University of Nebraska-Lincoln)

Abstract

Using a novel measure of stock-level trade imitation, we uncover ‘smart’ copycats: fund managers that use their own information when beneficial, and otherwise imitate other managers’ better trades. Contrary to previous research, we find that these partial imitation strategies lead to outperformance. Our ‘Copycat Score’ combines the propensity to imitate and to lead trades. Funds at the high and low ends of the score outperform all others. The Copycat Score is persistent in time, related to other measures of skill, and a good predictor of fund performance. We conclude that smart copycatting is another skill of successful fund managers.

Suggested Citation

  • Roberto Stein, 2022. "‘Smart’ copycat mutual funds: on the performance of partial imitation strategies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-31, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00398-7
    DOI: 10.1186/s40854-022-00398-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Copycat portfolios; Mutual funds; Portfolio holdings; Fund performance; Fund manager skill;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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